More than 6pc of First Active pool mortgages 'in arrears'
More than 6pc of mortgages taken over from First Active by Ulster Bank are currently in arrears, according to filings for a pool of mortgages being sold to investors.
The pool of mortgages were originally issued by First Active, but earlier this year the company was merged into Ulster Bank which has now taken on the loans. Investors can now buy tranches of the mortgages in a process known as securitisation.
Data for the pool, known as Celtic Residential Number 16, shows that 2.25pc of the mortgages were between one and two months in arrears, 1.68pc were two to three months in arrears, and 2.19pc were in arrears for more than three months. The remainder were not behind on their payment schedule. The data refers to the pool as of February 26.
There are 4,935 loans in the pool and while the data should not be seen as summing up the entire First Active residential book, it does represents a significant snapshot of the quality of the book at this time. The pool currently has a loan-to-value of 74.7pc and an average interest rate of 2.87pc.
Unusually the pool of mortgages mainly consists of buy-to-let mortgages, with 64pc held by investors and 33pc held by ordinary householders. A small number were held by the owners of second homes. Some 67pc of the mortgages were interest only. The prospectus makes it clear that payment holidays -- where the borrower makes no payments or reduced payments for a time -- are granted by First Active and Ulster Bank. In those cases the loan is not considered to be in arrears until the payment holiday period ends.
First Active admits that buy-to-let loans have an "apparent dependency'' on leasing income and this may increase the likelihood during difficult market conditions of a default. There is also the problem of taking possession of the property with sitting tenants.
This may affect the amount which the servicer could realise upon enforcement of the mortgage and a sale of the property,'' the bank admits.
"However, enforcement procedures in relation to such mortgages include appointing a receiver of rent in which case such a receiver must collect any rents payable in respect of the property and apply them accordingly in payment of any interest and arrears accruing under the mortgage,'' it said.
Yesterday, Moodys awarded an Aaa rating to most parts of the mortgage pool. It said the residential mortgage backed security (RMBS) transaction was the first to contain mostly buy-to-let mortgages, which tend to default at higher levels than ordinary household mortgages.
Moody's said it would monitor this transaction using the rating methodologies for Irish RMBS transactions.